Capitalize on the meltdown

[Andy]

Now it is doom and gloom but life moves on and stock prices move up and down.

Today Xstrata a UK FTSE 100 company dipped to £6 a share.  Last year they reached £44.34 per share.

Their profit for 2007 was about $4 billion pounds and the forecast for 2008 is 4.9 billion pounds. Today's market capitalization is about 6 billion pounds.
http://www.xstrata.com/media/news/2008/10/21/0800CET/200810210800.en..pdf

So the ratio of market cap to profit is about 1.5:1 Compare this to Google.com :-

http://finance.yahoo.com/q?s=Goog
http://www.guardian.co.uk/business/2008/feb/01/google.stockmarkets?gusrc=rss&feed=networkfront

here we have a market capitalization of $88 billion and a profit of $4.2 billion, so the ratio is: 21:1

So we have a big discrepancy between valuations. Now think about what the companies foundations are based on:

Xstrata: metals such as copper, nickel, platinum, zinc (as used in industry)

Google: Adwords advertising (as clicked on by web surfers)

So we have a highly valued company that is subject to the whims of web surfers for their success compared to a company that provides raw materials to industry.

This is not financial advice, but a post to stimulate conversation about how to maybe invest our money into the world stock markets based on rational decision making.

What do you think? ...

[Teflon]

If i were to invest a significant amount of money tomorrow i would buy gold. In fact i might even pick up the phone and speak to old gordon or mr darling and ask if there are any gold reserves for sale.

[Andy]

I am planning to buy Gold, another one of my friends is suggesting it.

I set up an account with Goldmoney.com

A key date may be January 20th when futures contracts run out and Gold has to be bought to settle the contracts. But I have no clue about how the markets are manipulated.

[Andy]

I am going to blog more about investing in shares/stocks.

Here is one about the Credit Crisis